# Wealth Management Model the growth of a wealth-management firm, from client assets and advisory fees through to operating profit and valuation. - Canonical: https://finamodel.com/templates/wealth-management - Excel download: https://finamodel.com/templates/wealth-management.xlsx - Category: Capital Markets - Model type: Valuation - Difficulty: Intermediate - Audiences: Founders & operators, Bankers & advisors, RIA owners, Wealth management M&A teams, Private equity aggregators, Investment bankers - Tags: wealth management, ria, aum, advisory fees, valuation ## Overview This wealth-management model is built for RIA owners, buyers, and investors who need a clearer picture of what drives value. It links client assets, net new money, market performance, fees, and team growth to the firm's financial results. Use it to plan growth, evaluate an acquisition, or assess a potential exit. The valuation framework turns the operating plan into an understandable view of enterprise value and investor returns. ## What's included - AUM roll-forward: opening balance, gross inflows, attrition outflows, net flows, market appreciation, closing and average AUM - Advisory-fee revenue on average AUM with an annual fee-compression assumption, plus planning fees and other revenue - Headcount sheet that derives advisor count from AUM and scales support staff off it - Expense base: advisor payout, support compensation, platform/custody, technology, occupancy, marketing, compliance, G&A - Income statement and cash flow: EBITDA, D&A, tax, net income, free cash flow, distributions, cash balance - Valuation: entry EBITDA multiple, DCF with terminal value, exit EBITDA multiple, owner equity IRR and MOIC - Sensitivity grid: 5x5 exit enterprise value across net flow rate and market return - Nine validation checks against named-range bounds plus an ALL CHECKS PASS rollup - AUM roll-forward: opening balance, gross inflows, attrition outflows, market appreciation, closing and average AUM - Advisory-fee revenue on average AUM with an annual fee-compression assumption - Expense base across advisor payout, support comp, platform/custody, technology, occupancy, marketing, compliance and G&A - Income statement, cash flow, and an entry / DCF / exit valuation with owner equity IRR and MOIC - 5x5 sensitivity grid plus nine in-workbook validation checks ## Wealth Management Model: How the RIA Operating Model and Valuation Works This wealth management model evaluates the operating economics and owner returns of a mid-size RIA over a seven-year hold. It links AUM growth from advisors, referrals, and tuck-ins with tiered advisory fees and a variable/fixed cost base to project EBITDA, then applies an Adjusted-EBITDA multiple and DCF to estimate enterprise value, equity IRR, and money multiple. ### What Drives the Firm's Economics The model's operating engine is AUM growth from four sources: existing-book referrals, advisor-sourced net new assets, tuck-in acquisitions of external books, and market appreciation net of client attrition. Advisor count follows an explicit hiring plan and each new advisor ramps over roughly three years toward a mature productivity target. - Advisor capacity sets a ceiling on deployable AUM. On the revenue side, a tiered breakpoint fee schedule means the blended realised fee drifts down as relationships grow larger, rather than relying on a flat compression assumption. - The cost base separates variable production costs from fixed overhead, so scale can dilute fixed costs and expand margin. ### How the Calculations Flow Through the Model The AUM roll-forward begins with opening AUM, adds referral and advisor-sourced inflows, adds tuck-in acquisitions, subtracts attrition, and applies market appreciation to the average balance. That closing AUM feeds the revenue calculation, where average relationship size is derived from average AUM and household count. - The four-tier breakpoint schedule then sets a fee per relationship, producing advisory revenue. Planning fees and other revenue are added. - Expenses are built as variable costs (advisor payout, support comp, platform/custody, marketing, recruiting, and tuck-in integration) plus fixed overhead (technology, occupancy, compliance, corporate back-office, and owner compensation). ### Key Outputs and Valuation Lenses Reported EBITDA flows from revenue minus total operating expenses. A normalization add-back for above-market owner compensation converts reported EBITDA into Adjusted EBITDA, the valuation base. - The model also builds a margin bridge that decomposes the Year 0 to Year 7 reported-margin change into fixed-cost dilution and a variable-cost and fee-mix effect. Free cash flow starts with net income, adds back D&A and the increase in fee float from quarterly advance billing, then subtracts capex and tuck-in acquisition spend. - A target payout ratio determines owner distributions, with retained cash building a balance. Valuation triangulates an entry enterprise value from a Year-0 Adjusted-EBITDA multiple, a DCF from projected free cash flow plus a terminal value, and an exit enterprise value from a Year-7 Adjusted-EBITDA multiple. Equity IRR and MOIC follow from the owner cash-flow stream. ### Practical Use and Model Governance The model is designed for an owner or investor evaluating growth, an acquisition, or an exit from the perspective of a seven-year hold. A dashboard presents KPI cards, trend charts, and an AUM-build waterfall, while an assumptions sheet holds all inputs as named ranges. - Eighteen validation checks verify that the AUM roll-forward ties, adjusted EBITDA reconciles to reported EBITDA plus the add-back, margin expands, advisor capacity remains above deployed AUM, fee float changes tie to level deltas, cash never goes negative, and the sensitivity center equals the model's exit enterprise value. - A 5x5 sensitivity grid shows exit enterprise value under net-flow-rate and market-return offsets, with a data-table prompt for exact recomputation. Note that the public download is a values-only preview, not a live formula workbook. ## Built for the RIA deal desk A wealth-management firm is worth a multiple of its EBITDA, and that EBITDA flows from AUM, fee rate, and a headcount-driven cost base. This template lays all three on named-range inputs and reads the owner equity IRR and MOIC straight off the Valuation sheet. ## AUM and fee compression modelled explicitly Revenue is not a single growth rate. An AUM roll-forward separates client flows from market return, and the advisory fee rate compresses each year, so the model shows what a softening fee environment costs margin and exit value. ## Audit-friendly mechanics Every input is a named-range cell, every formula is one or two operations, every check threshold is itself a named-range bound, and the workbook passes static-value, self-reference, dead-assumption, and unused-named-range scans. ## Built for the RIA deal desk A wealth-management firm is worth a multiple of its EBITDA, and that EBITDA flows from AUM, fee rate, and a headcount-driven cost base. This template lays all three on named-range inputs and reads the owner equity IRR and MOIC straight off the Valuation sheet. ## AUM and fee compression modelled explicitly Revenue is not a single growth rate. An AUM roll-forward separates client flows from market return, and the advisory fee rate compresses each year, so the model shows what a softening fee environment costs margin and exit value. ## Audit-friendly mechanics Every input is a named-range cell, every formula is one or two operations, every check threshold is itself a named-range bound, and the workbook passes static-value, self-reference, dead-assumption, and unused-named-range scans. ## Workbook structure ### Cover Workbook overview, sheet legend, and tab-colour key for navigation. - Title and scope framing - Sheet-by-sheet purpose summary - Tab-colour legend ### Assumptions Every driver in one sheet: AUM flows, fees, headcount, costs, valuation, and validation bounds. - Opening AUM, gross inflow and attrition rates, market return - Advisory fee rate, fee compression, planning fee, household growth - Target AUM per advisor, support ratio, payout rate, salaries - Discount rate, terminal growth, entry and exit EBITDA multiples - Derived rows and validation-bound inputs ### AUM_Rollforward Assets under management from Year 0 to Year 7. - Opening AUM equals prior-year close - Gross inflows and attrition outflows as a percentage of opening AUM - Market appreciation on opening plus half of net flows - Closing AUM and average AUM ### Revenue Advisory fees, planning fees, and other revenue. - Advisory fee rate compressing each year - Advisory fee revenue = average AUM times fee rate - Financial planning fees = households times annual fee - Other revenue and blended yield on AUM ### Headcount Advisor and support-staff counts derived from AUM. - Advisor count = closing AUM / target AUM per advisor - Support staff = advisors times the support ratio - AUM per advisor as a capacity check ### Expenses The full operating cost base. - Advisor compensation as a payout share of advisory fees - Support compensation as benefit-loaded headcount cost - Platform/custody fees as basis points on average AUM - Technology, occupancy, marketing, compliance, G&A ### Income_Statement Revenue through to net income with margins. - Total revenue less total opex equals EBITDA - D&A and EBIT - Tax on positive EBIT (no debt) and net income - EBITDA margin and net margin ### Cash_Flow Free cash flow, distributions, and cash balance. - Net income plus D&A less the change in net working capital - Less capex equals free cash flow - Cumulative FCF and owner distributions - Cash balance roll-forward ### Valuation Entry, DCF, and exit valuation with owner returns. - Entry enterprise value = Year-0 EBITDA times entry multiple - DCF = PV of forecast FCF plus a Gordon-growth terminal value - Exit enterprise value = Year-7 EBITDA times exit multiple - Owner equity IRR and MOIC off the cash flow stream ### Sensitivity Exit enterprise value across net flow rate and market return. - Market return offset header row - Net flow rate offset column - Grid formula: exit enterprise value - 5x5 = 25 value cells ### Checks Nine validation checks plus an ALL CHECKS PASS rollup. - AUM roll-forward ties; revenue and opex sum to components - EBITDA margin and AUM per advisor within bounds - Year-7 net income and cumulative FCF positive - Equity IRR within bounds; cash balance never negative ### Cover Workbook overview, sheet legend, and tab-colour key for navigation. - Title and scope framing - Sheet-by-sheet purpose summary - Tab-colour legend ### Assumptions Every driver in one sheet: AUM flows, fees, headcount, costs, valuation, and validation bounds. - Opening AUM, gross inflow and attrition rates, market return - Advisory fee rate, fee compression, planning fee, household growth - Target AUM per advisor, support ratio, payout rate, salaries - Discount rate, terminal growth, entry and exit EBITDA multiples - Derived rows and validation-bound inputs ### AUM_Rollforward Assets under management from Year 0 to Year 7. - Opening AUM equals prior-year close - Gross inflows and attrition outflows as a percentage of opening AUM - Market appreciation on opening plus half of net flows - Closing AUM and average AUM ### Revenue Advisory fees, planning fees, and other revenue. - Advisory fee rate compressing each year - Advisory fee revenue = average AUM times fee rate - Financial planning fees = households times annual fee - Other revenue and blended yield on AUM ### Headcount Advisor and support-staff counts derived from AUM. - Advisor count = closing AUM / target AUM per advisor - Support staff = advisors times the support ratio - AUM per advisor as a capacity check ### Expenses The full operating cost base. - Advisor compensation as a payout share of advisory fees - Support compensation as benefit-loaded headcount cost - Platform/custody fees as basis points on average AUM - Technology, occupancy, marketing, compliance, G&A ### Income_Statement Revenue through to net income with margins. - Total revenue less total opex equals EBITDA - D&A and EBIT - Tax on positive EBIT (no debt) and net income - EBITDA margin and net margin ### Cash_Flow Free cash flow, distributions, and cash balance. - Net income plus D&A less the change in net working capital - Less capex equals free cash flow - Cumulative FCF and owner distributions - Cash balance roll-forward ### Valuation Entry, DCF, and exit valuation with owner returns. - Entry enterprise value = Year-0 EBITDA times entry multiple - DCF = PV of forecast FCF plus a Gordon-growth terminal value - Exit enterprise value = Year-7 EBITDA times exit multiple - Owner equity IRR and MOIC off the cash flow stream ### Sensitivity Exit enterprise value across net flow rate and market return. - Market return offset header row - Net flow rate offset column - Grid formula: exit enterprise value - 5x5 = 25 value cells ### Checks Nine validation checks plus an ALL CHECKS PASS rollup. - AUM roll-forward ties; revenue and opex sum to components - EBITDA margin and AUM per advisor within bounds - Year-7 net income and cumulative FCF positive - Equity IRR within bounds; cash balance never negative ## Features - **AUM-driven revenue engine:** Advisory fees flow from an explicit AUM roll-forward - gross inflows, attrition, and market appreciation - so revenue moves with the two levers that actually drive an RIA. - **Headcount derived from AUM:** Advisor count is AUM divided by a target book size per advisor, and support staff scale off advisor count, so the cost base grows with the firm rather than being typed in by hand. - **Triangulated valuation:** Entry and exit EBITDA multiples sit alongside a discounted-cash-flow view, and the owner equity IRR and MOIC fall straight out of the distribution-plus-exit cash flow stream. ## Use cases - **RIA acquisition underwriting:** Test whether a book of AUM bought at an entry EBITDA multiple clears the owner's return hurdle once flows, fee compression, and the cost base are projected forward. - **Fee-compression stress testing:** Flex the advisory fee rate and compression assumption to see how much margin and exit value a softening fee environment costs the firm. - **Organic-growth planning:** Use the AUM roll-forward and headcount sheet to size how many advisors a net-new-asset target implies and what it does to EBITDA margin. ## Frequently asked questions ### What is a wealth-management firm model? It is an operating model and valuation of a Registered Investment Advisor (RIA) built from the owner perspective. Advisory-fee revenue flows from an AUM roll-forward, a headcount-driven cost base produces EBITDA, and the firm is valued on EBITDA multiples and a DCF to give an owner equity IRR. ### How is AUM projected? Through an explicit roll-forward: opening AUM plus gross client inflows, less attrition outflows, plus market appreciation on the average balance, equals closing AUM. Average AUM drives advisory-fee revenue, and the two flow levers are separated from the market-return lever. ### What is fee compression and why model it? Industry advisory fees trend down over time. The model starts the advisory fee rate at 85 bps and compresses it by a small relative percentage each year, so revenue does not simply track AUM one-for-one and the cost of a softening fee environment is visible. ### How is the firm valued? Three lenses: an entry EBITDA multiple on Year-0 EBITDA, a discounted cash flow (PV of forecast free cash flow plus a Gordon-growth terminal value), and an exit EBITDA multiple on Year-7 EBITDA. The owner equity IRR and MOIC come off a Year-0 outflow, annual distributions, and a Year-7 distribution plus exit value. ### Does this model carry debt? No. The base case is an all-equity owner, so equity value equals enterprise value throughout. For a financed acquisition, pair this with the LBO or search-fund template. ### Can I resize the firm or change the hold? Yes. Opening AUM, flow rates, fee rate, and the EBITDA multiples are all named-range inputs. The builder is parameterised by NUM_PERIODS, currently 8, equal to Year 0 plus a seven-year forecast. Bump it to extend the horizon. ## Related templates - [Family Office Financial Plan](https://finamodel.com/templates/family-office-model) - [Search Fund Acquisition Model](https://finamodel.com/templates/search-fund-model) - [Consulting Firm](https://finamodel.com/templates/consulting-firm)